Last night, after everyone was gone for the weekend, Microsoft announced that the European Commission had hit the company with a statement of objections regarding its practice of bundling Internet Explorer with Windows. <http://www.microsoft.com/presspass/press/2009/jan09/01-16statement.mspx>. A couple of hours ago, the Commission issued a confirming press release. <http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/09/15&format=HTML&aged=0&language=EN&guiLanguage=en>.
I'd suggest taking some of the reports with a grain of salt. E.g., the New York Times and the Washington Post have both just issued articles claiming that the Commission ordered Microsoft to unbundle MSIE and Windows throughout the E.U. <http://www.nytimes.com/2009/01/17/technology/companies/17soft.html?_r=1&ref=technology>. <http://www.washingtonpost.com/wp-dyn/content/article/2009/01/16/AR2009011604570.html?hpid=sec-tech>. The problem is that neither attributed any source for that information other than the two press releases, which do not state what remedy the Commission's statement of objections specifies. The original complaint was filed by Opera in January of 2008, alleging, according to the Commission, that Microsoft had: "... engaged in illegal tying of its Internet Explorer product to its dominant Windows operating system. The complaint alleges that there is ongoing competitive harm from Microsoft's practices, in particular in view of new proprietary technologies that Microsoft has allegedly introduced in its browser that would reduce compatibility with open internet standards, and therefore hinder competition. In addition, allegations of tying of other separate software products by Microsoft, including desktop search and Windows Live have been brought to the Commission's attention. The Commission's investigation will therefore focus on allegations that a range of products have been unlawfully tied to sales of Microsoft's dominant operating system." <http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/08/19&format=HTML&aged=0&language=EN&guiLanguage=en>. Opera had originally requested that the Commission *either* order the unbundling of MSIE from Windows or to require the company to bundle competing browsers with Windows. The press releases are silent as to what remedy the Commission is ordering, so one has to wonder whether the Post and the Times have read more into the press releases than they state. The cursory press releases do not discuss the proprietary extensions and undermining of open web standards issues, nor the issues involving the tying of desktop search and Windows Live to Windows. A further complaint by the European Committee for Interoperable Systems ("ECIS") --- largely an IBM front organization --- reported in the last linked press release involves allegations that Microsoft undermined open standards through, inter alia, withholding the specs for the MS Office binary file formats, pushing OOXML to compete with the existing OpenDocument international standard, and withholding the communications protocols for its software stack that connect MS Office to the company's new office productivity fortress under construction on the server side, e.g., Sharepoint Server. That investigation later expanded to encompass allegations that Microsoft had packed national standardization bodies to get OOXML approved by ISO/IEC. The ECIS investigation is still under way. It is conceivable to me that the Opera complaint regarding the undermining of open web standards has been rolled into that investigation rather than being handled in the investigation whose preliminary result was just announced. There is overlapping subject matter. I should also mention that in European Comission parlance, an "investigation" has a sense not commonly associated with investigations by U.S. government agencies; an "investigation" is more equivalent to a U.S. Federal Trade Commission administrative prosecution of antitrust charges, whose final decisions can be reviewed by a federal court of appeals. In this instance, the "investigation" involved is an administrative prosecution by the Director General of the Commission's Competition Directorate, herself a member of the Commission. The "statement of objections" just issued represents the Commission's proposed final position, with the burden now shifting to Microsoft to persuade the Commission that it has erred in the statement of objections. In other words, Microsoft has one last chance to assist the Commission's lawyers in refining the quality of the final decision. :-) Microsoft has eight weeks to respond and can request an oral hearing. Microsoft is in a largely untenable position because of its previous behavior. DG Competition ruled against Microsoft in 2004 in regard to disclosure of the Windows < > Windows Server communications protocols and the company's bundling of Windows Media Player. Microsoft was hit with a whopping fine and ordered to go forth and sin no more "with similar object or effect." The company's 1-way definition of interoperability was rejected and it was also ordered to disclose the communications protocols with a degree of specificity sufficient to place competitors on an "equal footing" in regard to the quality of 2-way interoperability Microsoft achieved with its own software. In regard to WMP, Microsoft was ordered to market a version of Windows in Europe that did not include WMP, what I dubbed the "Windows Unmedia Edition." Microsoft responded with what I can most charitably describe as arrogance. Microsoft appealed and requested that the Court of First Instance stay the Commission's order pending appeal. That request was denied. The Windows Unmedia Edition was duly trotted out but Microsoft sold it at the same price as the version of XP that included WMP. There were audible rumblings of discontent from DG Competition staff over Microsoft taking advantage of a loophole left in the order. Microsoft added fuel to the fire by stalling the required communications protocol disclosures and charging rather outrageous fees for them. This resulted in a further, larger fine for what would be analogous in the U.S. to as contempt of court. Meanwhile Microsoft continued down the path of extending its existing monopolies into new areas via software bundling practices and inadequate disclosure of the interop interfaces for its software. In simpler terms, one might say that Microsoft's managers made the mistake of flipping off DG Competition, betting the company's business plan on a reversal or substantial weakening of the DG Competition 2004 order in the Court of First Instance. Big mistake. Very big mistake. Humongously huge mistake. On September 17, 2007 all 13 judges of the Court of First Instance issued a joint decision that was instantly recognized as a landmark in the law governing software interoperability. <http://curia.europa.eu/jurisp/cgi-bin/gettext.pl?where=&lang=en&num=79929082T19040201&doc=T&ouvert=T&seance=ARRET>. Microsoft won only a trivial collateral issue. The DG Competition Order was otherwise upheld. I will always remember the shocked look on the face of Brad Smith, Microsoft's chief in-house legal counsel, in a press conference an hour after the decision was released. The man was rocked to his very core. The problem Microsoft faced was that it had built a solid track record that the fines and remedial orders issued by DG Competition were inadequate to coerce compliance. And DG Competition has the power even to break up companies when other remedial orders are inadequate. So the company since then has been very responsive to every twitch of DG Competition staff's eyebrows. Many of the disclosures sought through the ECIS complaint have already been made, with DG Competition expressing approval for Microsoft's words when it announced the disclosures but with a stern reminder that the Commission expects more than the right words coming from the Microsoft press office and a reminder that the new disclosures were irrelevant to the issue of whether Microsoft had committed past violations. The survival of the company in its present form is potentially at stake. There are also some incentives at work in the E.U. that don't come into play in the U.S. Microsoft is a U.S. company, not European albeit that it operates through a subsidiary in the E.U. The E.U. has no incentive to continue to export its regional wealth to Redmond, Washington. And the Commission has found a huge E.U. government money-maker in prosecuting Microsoft for antitrust violations. So further Microsoft antitrust violations in the E.U. have somewhat of a "make my day" quality for DG Competition staff. Their return on invested staff time and resources is enormous. Because Microsoft transformed itself into the goose that lays the golden eggs for E.U. government, I do not expect DG Competition to break up the company absent truly outrageous and recalcitrant behavior. But I also do not expect DG Competition to issue orders as ineffective in restoring competition as the Windows Media Player aspects of the 2004 order. All of which boils down to saying that it's too soon to tell from the outside what Microsoft has been ordered to do. Because the news was only disclosed Friday night after everyone had gone home, I do not expect much in the way of clarification before Monday. Even then, it's apt to come in dribs and drabs and largely by inference from small details rather than all at once. E.g., the statement of objections that led to the 2004 order was never leaked and E.U. government differs substantially from U.S. government in regard to transparency. But Microsoft knows what the order says as does Opera. There may be details that leak. I apologize for the length of this missive, but this could potentially be another decision that makes the ground move beneath our feet. If Microsoft has in fact been ordered to unbundle MSIE from Windows, that plays havoc with Microsoft's current business plan for monopolizing the enterprise collaboration market. And if the company has been ordered to stop undermining open web standards with proprietary specifications, the company's "embrace, extend, and extinguish" strategy could be near its end. So I think the topic deserving of a lengthy post. We live in an interesting Time. Best regards, Paul -- Universal Interoperability Council <http:www.universal-interop-council.org> _______________________________________________ EUGLUG mailing list [email protected] http://www.euglug.org/mailman/listinfo/euglug
